What is really going on in these days of vast “over-supply?”

Editor:

An article on a Web site, taken from USDA’s Livestock, Dairy, Poultry Outlook Report, dated June 17, 2009, grabbed my attention when it stated that commercial dairy exports this year are expected to total 19.7 billion pounds on a skims/solids basis.

How could this be? Exports of nonfat dry milk were very strong last year totaling 391,363.6 metric tons, which equals about 7.7 billion pounds on a skims/solids basis.

However, we do export a lot of dry whey which is a byproduct of cheese making and has little or no value in the farmer’s milk check (other solids nonfat [OSNF]) after the $.1991 per pound make allowance is deducted.

OSNF averages run about 5.7 percent so it could be said that 1 pound of dry whey represents 17.55 pounds of milk on a skims/solids basis.

Thus, 350,341 metric tons of dry whey exported in 2008 would represent 13.55 billion pounds of milk, according to USDA.

In the first four months of 2009, the U.S. exported 111,000 metric tons of dry whey, representing nearly 4.3 billion pounds of milk.

The “market price” for dry whey averaged $.1716 per pound January through April, which meant deductions in farmers’ milk checks, after make allowances were taken out.

The average export price for dry whey was $.488 per pound while farmers were charged an average of $.028 per pound for OSNF in Order 1 or about $.16 per hundredweight of milk. What a deal!

If farmers had been paid based on the export price of $.488 per pound for dry whey, it would have increased milk checks by $1.80 per hundredweight.

I am wondering how a $.316 a pound price difference between “market price” and export price is justified considering the export price of nonfat dry milk was only about $.10 a pound above market price during the same period.

Now we know how these large volume figures for skims/solids basis is arrived at. Of course protein is much more valuable. The imports of casein and milk protein concentrate represented approximately 12 billion pounds in 2008 on a skims/solids basis.

In a related subject, according to USDA Foreign Agriculture Service (FAS), total dairy imports outpaced exports by about $211 million January through April 2009. Also, USDA has apparently ignored requests to purchase nonfat dry milk from government stocks for humanitarian food aide.

All of this makes one wonder what is really going on in these days of vast “over-supply.”

Gerald Carlin

Meshoppen, Pa.